Staying Financially Afloat

Written by Mardy Fones

If there’s more month left at the end of your money, it could be time for a change. Putting a stop to money leaks doesn’t have to be painful or involve self-denial. Identifying extra cash within your current lifestyle is about first finding the budget leaks, then creatively and strategically plugging them.

The first step, says Steve Rhode, founder of Myvesta, a nonprofit financial services organization, is to spend less – a step that begins not with a budget but a spending plan. “Frugality stinks,” says Rhode, explaining that a restrictive budget usually doesn’t work. “With a budget, people cross out everything fun, and that’s a prescription for failure. Instead, create a spending plan.”

To create a spending plan, track every penny you spend for one month. Use a pocket-sized notebook to record the date and amount each time you make a purchase or pay a bill.

Take it as a challenge to log every magazine, movie, tithe, bill, vending machine purchase, haircut and grocery item. After the month passes, sort the entries into categories such as utilities, rent, credit card bills (listing late fees separately), personal services, groceries, entertainment, clothing, and charity.

Suddenly, the budget leaks are obvious. Hefty credit card late fees are real budget drainers. Ditto for restaurant and fast-food meals as well as unmonitored entertainment spending.

Take an honest look at where you’re spending and make changes you can live with, such as reducing food expenses by using coupons, shopping at a less expensive grocery store, and dining out half as often. Shop for clothes and shoes at discount stores – not mainstream department stores – at the end of the season. Use the library to get books and movies. Some libraries even provide free Internet access and e-mail accounts – another costly extra.

Real spending savvy comes to those who marry their spending plan to their hopes and their future, says Rhode. “To stabilize your spending, you have to set goals and have dreams,” he says. “The real question is, Do you want to drink lattés every day, or do you want to be able to afford to go on mission trips or retire early? If you’re living paycheck-to-paycheck, you can’t even afford to take a week off.” Long-term dreams such as a house of your own, a reliable car, paying off student loans early, and helping others in need only happen when you plan.

Especially for Singles

According to Mary Hunt of Cheapskate.com and the Cheapskate Monthly, two media sources that help people make the most of their money, single adults have an edge when it comes to smart spending. “A single adult is more able to make significant money-saving changes,” says Hunt, adding that for couples or families, compromise and sacrifice can be complex.

“Singles can easily simplify their lives in ways that produce significant results quickly. Let’s say you need an extra $100 a month. You could pack your lunch instead of eating out and apply the money you save toward that goal.”

Other smart money moves she recommends include eliminating all but one mainstream credit card, then leaving that card at home. Utility bills can be reduced by adjusting the thermostat, turning off lights you’re not using, and combining errands to cut gas expenses. Where possible, carpool or use public transit.

“Without a deep-seated belief that overspending is wrong, money will disappear quickly,” says Hunt, who blames uncontrolled spending, in part, on advertising that encourages people to use credit cards to buy what they can’t afford.

The good news, she says, is that “living within your means is fashionable because it’s responsible.” Hunt sees a real movement toward getting out of debt and reducing lifestyles to fit incomes.

“The person who sets his own agenda and doesn’t care so much what others think is much more interested in the peace of mind and joy that result from living financially responsibly.”

Top 10 Worst Reason To Spend

Money is a tool you can use to build a good life and to help others. But if it has other, less values-based roles in your life, it’s time to re-evaluate. Ten signs that may indicate your spending isn’t about personal finance include:

1. Buying to impress or influence others
2. Short-changing your financial obligations, such as tithing and bill-paying, so you’ll have spending money
3. Spending to avoid feeling lonely
4. Spending money you don’t have by using credit cards
5. Experiencing a mood change just before or after shopping
6. Making multiple failed attempts to stop excessive spending
7. Spending as a way to escape problems or relieve stress
8. Lying, minimizing, or rationalizing to conceal your spending
9. Spending money because you think you deserve to do it
10. Losing out on significant opportunities – relationships, job, education, mission trips – because of debt

Make a "Change" Today

You’re committed to tracking your money for the next month or two and then creating a spending plan. But what about today? Cheapskate Monthly recommends the following to plug your budget leaks.

• Keep coins. When a bill comes to $4.02, pay with a $5. Then dump the change into a saving jar. At the end of the month deposit the contents of the jar in a savings account.
• Cancel at least one convenience service. Look closely at the money you spend on dry cleaning, laundry, newspaper subscription, cell phones, lawn maintenance, massages, cable TV, Internet service, and other non-essentials. Then cancel the one that’s least important.
• Pack your lunch, then deposit the money you would’ve spent in a savings account.
• Shop with cash. Except for payments that go through the mail, pay the old-fashioned way. When you’re spending currency (versus a credit card or check), you’re more likely to think twice about expenditures.
• Assess your insurance. Call your insurance agent today and ask how you can cut your rates. You may be able to save by folding in other insurance policies or by shopping for coverage on the Internet.
• Go hunting. Make finding the lowest price a personal challenge. Some profitable comparison-shopping candidates include long-distance service or calling cards, credit card fees and interest rates, prescription drugs, and airline tickets. Careful comparison shopping on the Internet can help you lower expenses on everything from groceries to car tires to furniture.